Investors Focus on US-China Ties and Fed’s Taper Hints
US equity futures and European stocks sank on Thursday, negatively affected by the latest development in the US-China relations. The Federal Reserve’s hint that there might be a potential reduction in stimulus also weighed heavily on investors’ spirits.
The Stoxx 600 Index arrested its three-day upward movement, brought down by the poor performance of the real estate and mining sectors. A number of British companies, among which are National Grid and Kingfisher, pushed the FTSE 100 0.7% down. BT group also contributed to the FTSE’s decline by shedding 2.9%, after the Deutsche Bank had downgraded it to “sell” finding its shares overvalued.
Asian markets ended up mixed, influenced by Joe Biden’s plans to amend a US ban on investments in companies linked to the Chinese military, which may submit many companies to scrutiny.
Market participants also evaluated the Federal Reserve’s remark that the central bank should start discussing the time frame for paring back its bond-buying program. Weighed down by the Federal Reserve’s comment, futures on the S&P 500 and Nasdaq 100 declined. The Dollar Index inched higher, while ten-year US Treasury yields floated around 1.60%.
Another reason for worries on Thursday was the potential speculative flurry reemerging in meme stocks; that is, stocks whose movement is determined by social media rather than by their performance in the market. AMC Entertainment Holdings climbed to an all-time high on Wednesday.
The Dollar Index added 0.1% at 90.025, rising from the week’s low of 89.662, a level not visited since early January. EUR/USD lost 0.1% to trade at 1.2196. USD/JPY advanced 0.2% to 199.77. The GBP/USD slid 0.1% to 1.4153, retreating thus from a three-year high of 1.4250 hit on Tuesday. The risk-sensitive AUD/USD gave up 0.2% to 0.7733.
Bitcoin traded on Thursday around $38,500, holding to its gains after May’s cryptocurrency downfall.
These are the moves in the markets that traders should watch on Thursday:
Stocks
The Stoxx Europe 600 retreated 0.1% during the early European session. The FTSE 100 moved 0.7% lower. Futures on the S&P 500 gave up 0.1%, and so did futures on the Nasdaq 100. Futures on the Dow Jones Industrial Average followed suit and also dropped 0.1%. The MSCI Asia Pacific Index jumped 0.1%. The MSCI Emerging Markets Index sank 0.1%.
Currencies
The Dollar Index added 0.1% at 90.025. EUR/USD gave up 0.1% to trade at 1.2196. USD/JPY gained 0.2% to 199.77. The GBP/USD receded 0.1% to 1.4153. The risk-sensitive AUD/USD lost 0.2% to trade at 0.7733.
Commodities
WTI dropped 0.23% to trade at $68.67 per barrel. Brent Crude slid 0.20% to trade at $71.21. Precious metals declined: Gold retreated 0.63% to $1,897.90 per ounce; Silver shed 0.87% to $27.96 per ounce; Platinum lost 0.48% at $1,188.88. Copper was 0.14% up, trading at $459.80.
Bonds
The yield on 10-year Treasuries rose one basis point to 1.60%. Germany’s 10-year yield gained two basis points to -0.18%. Britain’s 10-year yield moved three basis points up to 0.83%.
Looking forward
Traders should wait for the release of the May US employment report on Friday.
Have a profitable trading day!
